HK Trip

This past few weeks had been riddled by correction woes with most funds dropping by as much as 25%. I would be going to HK this Wed for a business trip. Thus, I would take a look and observe the investment climate to gain insights for China investments and provide updates next week.

Market Analysis

Last week, I talked about the duration of the correction. There are basically two factors affecting markets for this week. First is China's move to increase the reserve ratio to lower liquidity and secondly is the effect of the subprime crisis with highlights on Citibank and other European banks.

The first factor might be good in the long run to cool current fast rise of the index in both Shanghai and Hongkong although it might come as a shock to most speculators as the rate of fall is sharp. However, I do feel that somehow, China is going to push to allow their investors into Hongkong soon as previously, prices are much too high due to speculation of China's fund entry. Now, it should be priced at a relatively discounted rate of approximately 15%-20% which should be a good entry price for Chinese investors. Barring any unfortunate news, we might see an uprising trend either next week and in the last week of Nov which might push up global indexes.

For the 2nd factor, it's time to tally up losses so as to clear up the situation of how US and European banks current stand in terms of losses. Huge losses by Citibank is ringing alarm bells and this would prompt US/European banks to further anaylse the impact of the sub prime crisis and take measures to moderate these losses. However, we are also able to see stronger profits for retail stores and consumer electronics and this might be the silver lining. Nevertheless, it is still not worthwhile to put your bet in US markets although I suspect that with the strong growth of the global economy, US most likely would not go into a recession.

My advice for this week would be to start taking positions maybe next week when an uptrend starts forming.

Market Correction

Seems like today, the market correction is upon us. For high risk unit trusts especially China fund, today's price might cause your capital to drop by as much as 7%. Based on current trend, tomorrow might show a rebound but the ride might be tough ahead.

As an investor, this correction might be long overdue as hang seng had been hitting new heights almost every other day and it's time for a breather. In addition, big brother USA is not doing that well as seen by Citibank's problems. However, barring some very bad news, recovery might take place after 1-2 weeks.

If major asian indexes does not recoup its losses and in fact drop further on wednesday, you might want to wait a while before buying in more as the downtrend might continue. I do not advise buying in at the moment though even if you take a long term approach to investing and do not want to time the market. I do note that it's quite impossible to predict the lowest point of the market but it is still possible to buy when the market shows sign of recovery to ride on the tide up.